Tuesday, 09 December 2014 - 20:00
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Seed weekly - Portfolio Concentration
Investors holding very concentrated investment portfolios are a common occurrence in the investment world. Typical examples of concentrated portfolios include where an investor has the majority of his/her wealth tied up in shares of a privately owned business, holding large amounts of your employer’s stock, or being heavily invested in certain sectors of the market.
If the wealth of an investor is tied up in a concentrated portfolio, the risks faced are markedly different from a client with a diversified portfolio. Some (but not all) of the risks faced are highlighted below:
Valuation:
The value of any asset in the shorter term, especially shares, is worth what the next person is willing to pay for it. The audited statements may point to the longer term value of a business, but a large portion of the value may be lost when the person running the business is no longer there. It is therefore important to be aware of the value of the business principle/founder in a smaller enterprise and what the business is worth if he/she is no longer there.
Liquidity:
Another big risk facing the investor surrounds the liquidity of the asset. If a person holds a large amount of a single company’s stock and needs the assets to retire with, either the capital or dividends will need to fund the income for the investor. If these shares can be easily sold and the act of selling the shares doesn’t adversely affect the price, the risk is largely mitigated. However, in many instances the shares are illiquid, not enabling the investor to generate the required cash flow from selling the shares.
Volatility:
A very serious consideration, often overlooked, is the volatility one is exposed to when your wealth is concentrated. This is often more serious when the business is very dependent on the business cycle to make a profit. More concentrated portfolios afford less protection to investors during times when the assets underperform. As a rule of thumb, the peaks and troughs of the cycles are much less pronounced in a diversified portfolio compared to a concentrated one. For long term investors this is not as much of a concern as for a person looking to sell shares in the near to medium term.
Going concern:
This risk can be applied broadly and is applicable to many different situations. The most obvious going concern risk is when you have a large holding in your own business/employer’s shares and the company goes under. If this happens you are out of a job and made a big loss financially. This is the most extreme example. It can also happen when you are employed in a certain sector and use your expertise of this sector to buy shares in a related company because of your greater understanding of the industry. Once again if the sector is going through a difficult period your employment may be at risk at the same time as when the value your investment holdings will be, often severely, depressed.
Tax:
Most business owners are subject to being taxed at a very high level when they sell their shares. The risk for them is more pronounced as the majority of the stock they own was accumulated at a very low base cost (assuming that the shares were issued when the business was founded) and therefore almost the entire value will be seen as a taxable gain by the authorities. Not planning for the effect taxation has on your investment holdings may be detrimental to your financial health.
The above are a few of the risks faced by clients with concentrated portfolios. For each of the risks faced there are a multitude of options available for an investor. At Seed we are aware of the above and many more risk factors and through expert consultation are able unlock value and mitigate risks faced by our clients. Although it is crucial to manage the risks you face throughout the year it offers peace of mind to know that you have measures in place for the new calendar year fast approaching. By setting up a consultation with Seed we are able to assist you by putting measures in place to protect your wealth against risks such as those mentioned in this article.
Kind regards,
Stefan Keeve
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 09 Dec 2014
Top News
South African shares plunged more than 2 percent on Tuesday, the biggest one-day drop in a year, as falling oil and commodity prices depressed sentiment and dragged iron ore producers such as Kumba lower. Full story
Local markets
The JSE All Share fell 2.04% on Tuesday, as losses in resources and industrial shares weighed. Gold miners had gained 3.91% by 5pm. Statistics SA revealed today that local manufacturing slowed in October compared to last month. Full story |
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India ordered state governments to halt the operations of all unregistered, web-based taxi companies on Tuesday after a female passenger reported she was raped in New Delhi by a driver contracted to U.S. cab company Uber. Full storyMore than 150 protesters were arrested in California overnight after shutting down a major freeway in another outbreak of nationwide demonstrations against police use of deadly force on minorities. Full storyHong Kong police announced plans to clear away the last of the "Occupy" protest encampments that have blocked key roads in the financial hub for over two months, setting up what could be a final showdown with pro-democracy activists on Thursday. Full story |
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Markets | Investors aggressively sold
equities worldwide on Tuesday, after China's market posted its
worst day in five years and oil prices fell to levels. . . Full story | | Gold rose 2 percent on Tuesday,
hitting its highest since late October, as cautious comments
from U.S. Federal Reserve policymakers prompted a pullback. . . Full story | | Hong Kong shares fell on
Tuesday hit by profit-taking and a slump in Chinese stocks after
a two-week rally on the mainland.. . . Full story | | Japan's Nikkei share average fell
on Tuesday, snapping a seven-day winning streak and pulling away
from 7-1/2-year highs as a rebound in the. . . Full story |
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| Australian shares dropped 1.7
percent on Tuesday on a broad-based sell-off as renewed concerns
about global growth, sinking oil prices and declining business
confidence. . . Full story | | U.S. and European stocks fell on
Monday after weak Chinese and Japanese data stoked worries about
slowing global economic growth, while oil prices. . . Full story | | Gold jumped more than 1
percent on Monday on a brief surge of late-day technical buying
as it breached the $1,200-per-ounce level long. . . Full story | | Hong Kong shares rose on
Monday, heartened by strong U.S. employment data and as China
shares continued to outperform on the back of. . . Full story |
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SA Business | South Africa's manufacturing production slowed in line with expectations in October, expanding 2.2 percent year-on-year from a revised 8.6 percent growth in September, Statistics South Africa said on Tuesday.. . . Full story | | Statistics South Africa released its monthly mining production data for September on Tuesday. Below is the breakdown of the main minerals.. . . Full story | | South Africa's rand slipped further early on Tuesday after hitting record lows against the dollar in the previous session and looked set to continue its slide before the release of mining. . . Full story |
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| Global miner Anglo American aims to cut around 60,000 jobs as part of a wider reorganisation, Chief Executive Mark Cutifani said on Tuedsay.. . . Full story | | South Africa's Treasury sold 2.35 billion rand ($205 million) worth of its 2044, 2032 and 2036 bonds on Tuesday. Yields were mixed compared to their previous sales.. . . Full story | | Shares of South Africa's Impala Platinum fell to their lowest level in more than nine years on Tuesday after the company said it expected first-half earnings to fall by more than. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 16:51 | 48578.34 | -1011.86 | -2.04% | JSE Top 40 | 16:49 | 42941.81 | -1030.52 | -2.34% | JSE Gold | 16:50 | 1107.91 | 41.68 | 3.91% | JSE Financial | 16:50 | 39958.65 | -740.74 | -1.82% | JSE Industrial | 16:51 | 68368.10 | -1468.46 | -2.10% | JSE Indust 25 | 16:50 | 60421.97 | -1412.64 | -2.28% | JSE Resource | 16:50 | 41835.02 | -949.83 | -2.22% | DJ Futures | 19:58 | 17710.00 | -149.00 | -0.83% | DJ Ind | 19:58 | 17715.34 | -137.14 | -0.77% | SP 500 | 19:58 | 2049.38 | -10.93 | -0.53% | Nasdaq | 19:58 | 4733.69 | -7.00 | -0.15% | FTSE 100 | 17:57 | 6549.83 | -122.32 | -1.83% | DAX | 19:08 | 9793.71 | -221.28 | -2.21% | CAC40 | 19:08 | 4263.94 | -111.54 | -2.55% | Nikkei | 08:28 | 17813.38 | -122.26 | -0.68% | Shanghai | 09:28 | 2856.27 | -163.99 | -5.43% | Hang-Seng | 06:28 | 23827.37 | -260.59 | -1.08% | All Ords | 07:47 | 5258.30 | -90.60 | -1.69% | NZSE 50 | 08:28 | 5542.93 | 13.61 | 0.25% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1228.80 | 25.58 | 2.13% | Gold R | 19:58 | 14069.91 | 193.24 | 1.39% | Gold R/kg | 19:58 | 452255 | 9869 | 2.23% | Silver $ | 19:59 | 17.0600 | .7240 | 4.43% | Platinum $ | 19:59 | 1245.51 | 18.51 | 1.51% | Palladium $ | 19:59 | 811.05 | 13.80 | 1.73% | R157 | 22/09 | 6.99 | -.02 | 0.00% | R186 | 17:35 | 7.81 | -.02 | -0.19% | R204 | 17:17 | 7.01 | .04 | 0.50% | R207 | 17:37 | 7.25 | .04 | 0.62% | Brent Crude | 19:58 | 66.86 | -2.21 | -3.20% | Rand / Dollar | 19:59 | 11.4491 | -0.0869 | -0.75% | Rand / Pound | 19:55 | 17.9138 | -0.1213 | -0.67% | Rand / Euro | 19:55 | 14.1835 | -0.0174 | -0.12% | Rand / NZD | 19:58 | 8.8308 | -0.0022 | -0.02% | Rand / AUD | 19:55 | 9.5241 | -0.0464 | -0.48% | Yen / Dollar | 19:59 | 119.2990 | -1.2500 | -1.04% | Euro / Dollar | 19:55 | 0.8070 | -0.0048 | -0.59% | Dollar / Euro | 19:59 | 1.2393 | 0.0078 | 0.63% | Pound / Dollar | 19:55 | 0.6377 | -0.0006 | -0.09% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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09/12/2014 | 116 | 251 | 59 | 426 | 254,891,320 | R18,975,987,753 | 310897 | 1506583 | 08/12/2014 | 167 | 184 | 61 | 412 | 237,652,586 | R15,209,514,321 | 225686 | 1327440 | 05/12/2014 | 188 | 150 | 66 | 404 | 216,666,193 | R15,800,991,658 | 210061 | 1306332 | 04/12/2014 | 142 | 216 | 53 | 411 | 230,114,481 | R16,841,041,427 | 226236 | 67705 | 03/12/2014 | 217 | 157 | 62 | 436 | 224,842,448 | R16,424,035,836 | 249618 | 1488899 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 42,941.81 | -1030.52 | -2.34% | Industrial | 68,368.10 | -1468.46 | -2.10% | Mid Cap | 67,642.88 | -344.84 | -0.51% | Small Cap | 57,147.41 | -436.14 | -0.76% | Resource 20 | 41,835.02 | -949.83 | -2.22% | Industrial 25 | 60,421.97 | -1412.64 | -2.28% | Financial 15 | 15,277.83 | -329.01 | -2.11% | Financial & Ind. 30 | 64,666.41 | -1536.08 | -2.32% | All Share | 48,578.34 | -1011.86 | -2.04% | Oil & Gas | 30,587.66 | -998.90 | -3.16% | Mining | 25,299.36 | -483.48 | -1.88% | Gold Mining | 1,107.91 | 41.68 | 3.91% | Platinum Mining | 33.60 | -.57 | -1.67% | GENERAL MINING | 7,416.62 | -195.89 | -2.57% | Oil & Gas Producers | 16,446.42 | -537.09 | -3.16% | Basic Materials | 22,980.37 | -458.93 | -1.96% | Chemicals | 22,153.49 | -454.79 | -2.01% | Forestry & Paper | 32,230.41 | -857.41 | -2.59% | Industrial Metals | 13,479.47 | -376.43 | -2.72% | Industrials | 44,718.68 | -621.39 | -1.37% | General Industrials | 151.04 | -1.63 | -1.07% | Consumer Goods | 62,761.51 | -1321.09 | -2.06% | Automobiles & Parts | 7,420.63 | -108.69 | -1.44% | Household Goods | 404.08 | -9 | -2.11% | Health Care | 9,865.92 | -205.18 | -2.04% | Beverages | 203.44 | -3.46 | -1.67% |
| | Index Name | RP | Move | % Move | Food Producers | 9,130.55 | -23.02 | -0.25% | Personal Goods | 1,044.31 | -28.46 | -2.65% | Consumer Services | 13,175.34 | -382.43 | -2.82% | General Retailers | 71,263.14 | -182.49 | -0.26% | Travel & Leisure | 6,227.77 | -7.72 | -0.12% | Media | 302.62 | -13.98 | -4.42% | Support Services | 2,905.13 | -5.29 | -0.18% | Telecommunications | 10,604.35 | -160.35 | -1.49% | Financials | 39,958.65 | -740.74 | -1.82% | Banks | 70,321.17 | -1317.38 | -1.84% | Non-life Insurance | 55,536.32 | -229.70 | -0.41% | Life Insurance | 37,209.58 | -768.69 | -2.02% | General Financial | 3,866.43 | -102.11 | -2.57% | Technology | 48,382.87 | -32.72 | -0.07% | SHARIAH TOP40 | 3,456.28 | -78 | -2.19% | FTSE/JSE SHARIAH ALL | 3,699.43 | -70 | -1.85% | COAL MINING | 13,273.85 | -245 | -1.81% | FTSE JSE Fledgling | 6,453.65 | 20 | 0.32% | FTSE/JSE Alt X | 1,393.43 | 1 | 0.07% | SA LISTED PROPERTY | 578.63 | | -0.65% | CAPPED PROPERTY | 502.94 | | -1.05% | RESOURCE | 22,833.69 | -490 | -2.10% | DIVIDEND PLUS | 226.27 | -3 | -1.43% | FTSE/JSE RAFI 40 | 9,259.81 | -176 | -1.87% | Capped Top 40 | 22,901.08 | -549 | -2.34% | Capped All Share | 24,635.87 | -513 | -2.04% | JSE TABACO | 8,262.80 | -240 | -2.82% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | AGL | ANGLO AMERICAN PLC | BUY | 08/12/2014 | BIL | BHP BILLITON PLC | BUY | 08/12/2014 | LEW | LEWIS GROUP LIMITED | HOLD | 08/12/2014 | SLM | SANLAM LIMITED | HOLD | 05/12/2014 | SPP | THE SPAR GROUP LTD | BUY | 05/12/2014 |
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Results Expected** Expected | Company Name | Fin. Date | 11/12/2014 | DELTA INT | May 2014 (Q) | 11/12/2014 | HWANGE | December 2013 (Final) | 11/12/2014 | HWANGE-A | December 2013 (Final) | 11/12/2014 | SACOVEN | September 2014 (Interim) | 11/12/2014 | SVF | June 2014 (Final) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | LIBHOLD11 | 08/12/14 | 23/12/14 | 05/01/15 | ZAR 0.0550 | NAMPAK 6%P | 05/12/14 | 16/01/15 | 26/01/15 | ZAR 0.0600 | NAMPAK 6.5 | 05/12/14 | 16/01/15 | 26/01/15 | ZAR 0.0650 | ARGENT | 04/12/14 | 20/03/15 | 30/03/15 | ZAR 0.0800 | CROOKES | 02/12/14 | 02/01/15 | 12/01/15 | ZAR 0.6500 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | MRPRICE | 17/11/14 | 05/12/14 | 15/12/14 | ZAR 2.1150 | ECSP C | 28/11/14 | 05/12/14 | 15/12/14 | ZAR 1.0164 | HOLDSPORT | 18/11/14 | 05/12/14 | 15/12/14 | ZAR 0.9900 | HOLDSPORT | 03/10/14 | 05/12/14 | 15/12/14 | ZAR 0.8500 | ECSP A | 28/11/14 | 05/12/14 | 15/12/14 | ZAR 0.7671 |
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Upcoming AGMs** Code | Company Name | Date | Status | AIA | Ascension Properties Ltd. | 09/12/2014 | Confirmed | AIB | Ascension Properties Ltd. | 09/12/2014 | Confirmed | CAT | Caxton and CTP Publishers and Printers L... | 10/12/2014 | Confirmed | CATP | Caxton and CTP Publishers and Printers L... | 10/12/2014 | Confirmed | GPL | Grand Parade Investments Ltd. | 10/12/2014 | Confirmed |
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